the RUSSIA oil & gas competitive intelligence report - Report Buyer

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Russia Oil and Gas Competitive Intelligence Report 2010 Gazprom Neft (formerly Sibneft) Company Analysis SWOT Analysis Already the dominant force in the Russian energy sector, Gazprom’s attempts to become a major oil player paid off in 2005 with the acquisition of Sibneft. Now re-christened Gazprom Neft, Sibneft was due to have merged with Yukos to form one of the world’s leading oil producers. The collapse of the deal during the Yukos crisis, however, made an eventual link with another player inevitable. Gazprom’s move denied Western companies the chance to acquire a well managed, profitable business – but has given the gas giant a major opportunity to develop oil expertise. Strengths: Significant role in Russian oil supply Cost-effective producing assets Substantial domestic refining business Financial Statistics Revenues: • US$24.17bn (2009) • US$33.08bn (2008) • US$21.77bn (2007) • US$20.18bn (2006) Net income: • US$2.77bn (2009) • US$4.66bn (2008) • US$4.14bn (2007) • US$3.66bn (2006) Operating Statistics Net oil production (inc. equity entitlement) • 957,000b/d (2009) • 932,000b/d (2008) • 868,700b/d (2007) • 657,000b/d (2006) Refining throughput • 670,700b/d (2009) Strong retail portfolio State support Weaknesses: Lack of foreign partners Rising investment requirement Some cost and efficiency disadvantages Opportunities: International expansion Focus on under-explored Russian regions Cost cutting/asset upgrading potential Threats: Sustainability of Russian oil growth Oversupply in CEE refining capacity Competition with Rosneft © Business Monitor International Ltd Page 29
Russia Oil and Gas Competitive Intelligence Report 2010 Market Position Gazprom Neft was founded as Sibneft in 1995 and took on a broad portfolio of former state assets. Following two failed merger attempts with Yukos in September 2005, Gazprom acquired 72% in Sibneft, buying out businessman Roman Abramovich’s stake in a US$13bn deal, raising its stake to 95.7% after exercising its buy-out right in April 2009. The company was then renamed Gazprom Neft. It is now the fifth largest crude producer in Russia and has one of the best growth rates, owing to its strong position in high-potential regions. Gazprom Neft’s upstream assets are chiefly located in the Northwest and Western Siberia (Yamal-Nenets, Khanty-Mansiysk, Omsk, Tomsk, Tiumen), as well as Irkutsk and Chukotka further east. The main production arm is Noyabrskneftegaz, which operates about 30 fields in the Yamal-Nenets and Khanty-Mansiysk autonomous regions and holds around 60% of the company’s reserves. Other major producing assets include stakes in Slavneft and Tomskneft, jointly owned with TNK-BP and Rosneft respectively. As of Q309 Gazrpom Neft also has managerial control of Sibir Energy, which it won after significant effort. Sibir's upstream operations are focused on Khanty-Mansiysk where it holds the Salym fields, operated on a 50:50 basis with Shell, and the Yuzhnoe and Orekhovskoe fields, operated by subsidiary Magma Oil (95%). In 2009, Sibir’s net output averaged around 80,000b/d. Gazprom Neft’s refining and market assets include the 385,000b/d Omsk Refinery and a 60% vote in the 240,000b/d Moscow Oil Refinery, as well as a growing network of service stations primarily located in Western Siberia, although Sibir’s acquisition has given it a strong position in Moscow. Through its wholly owned unit Moscow Oil and Gas Company (MOGC), Sibir owns 100% of 69 MKT-branded service stations, 51% of Mosnefteproduct's 64 stations and storage terminals and 25% of BP's Moscow retail network. Strategy The company is involved in the planned 1mn b/d Burgas-Alexandroupolis pipeline, which will transport Russian crude to Europe and is preliminarily scheduled for completion in 2010. Gazprom Neft also works on the Northern Zadegan project in Iran. Gazprom Neft plans to produce 1.8mn b/d by 2020 through developing Arctic fields and investing US$70bn. Gazprom Neft expects to receive the licence to develop the Arctic Prirazlomnoye deposit by 2010 and plans to start work at the giant offshore field five years later. Downstream, the company plans to raise refining capacity until it accounts for two-thirds of crude production. It will achieve this goal by purchasing refineries at home and abroad, and is particularly interested in buying more European assets after in February 2009 acquiring 51% of Serbia’s Naftna Industrija Srbije (NIS). © Business Monitor International Ltd Page 30
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